US Markets
Friday, December 8th, 2023 2:54 pm EDT
Key Points
- Strong Job Market Performance in November: The key takeaway is the robust job market performance in November, with nonfarm payrolls growing by 199,000, surpassing expectations. The unemployment rate also declined to 3.7%, compared to the forecasted 3.9%, and a broader measure of unemployment, including discouraged workers and part-time positions, fell to 7%, indicating positive trends despite signs of a weakening economy.
- Industry and Wage Trends: The article highlights notable trends in specific industries, with healthcare leading in job growth by adding 77,000 jobs. Other sectors such as government, manufacturing, and leisure/hospitality also experienced substantial gains. Additionally, average hourly earnings, a key inflation indicator, increased by 0.4% for the month and 4% from a year ago, aligning with expectations. The overall sentiment is one of a “strong but moderating” labor market.
- Economic Outlook and Federal Reserve’s Role: The article discusses the current economic context, with the U.S. economy defying recession expectations but facing a predicted slowdown in the fourth quarter and modest gains in 2024. The Federal Reserve is closely monitoring job numbers as part of its efforts to address inflation. The strong jobs report has influenced market expectations, with futures markets indicating a potential pause in the Fed’s rate-hiking campaign and a shift towards cuts in the coming year. The Fed’s upcoming policy meeting is seen as crucial, and policymakers aim for a soft landing characterized by modest growth, sustainable wage increases, and inflation returning to the Fed’s 2% target. Concerns about the end of COVID-era stimulus payments and pressure from higher interest rates potentially impacting consumer spending are also highlighted.
In November, the U.S. job market exhibited resilience, surpassing expectations as nonfarm payrolls expanded by 199,000, slightly exceeding the anticipated 190,000. This growth marked an improvement from the unrevised October figure of 150,000, as reported by the Labor Department. Contrary to predictions of a weakening economy, the unemployment rate decreased to 3.7%, surpassing the forecasted 3.9%. Simultaneously, the labor force participation rate rose to 62.8%, contributing to a comprehensive unemployment rate, incorporating discouraged workers and part-time positions, which fell to 7%, a 0.2 percentage point decline.
The household survey, a key factor in determining the unemployment rate, indicated robust job growth of 747,000 and the addition of 532,000 workers to the labor force. Average hourly earnings, a critical inflation indicator, rose by 0.4% for the month and 4% from the previous year. Despite a slightly higher-than-estimated monthly increase, the yearly rate aligned with expectations. Market reactions were mixed, with stock market futures modestly negative and Treasury yields surging.
Health care experienced significant growth, adding 77,000 jobs, while government (49,000), manufacturing (28,000), and leisure and hospitality (40,000) also saw notable gains. In contrast, retail lost 38,000 jobs heading into the holiday season, particularly impacting department stores. Transportation and warehousing exhibited a decline of 5,000 jobs.
The duration of unemployment saw a sharp reduction, averaging 19.4 weeks, the lowest since February. This positive jobs report arrives at a pivotal moment for the U.S. economy. Despite defying expectations of a recession, forecasts suggest a substantial slowdown in the fourth quarter and modest gains in 2024. GDP is projected to rise at a 1.2% annualized pace in Q4, with an expected growth of around 1% in 2024.
The Federal Reserve closely monitors these job figures in its efforts to address inflation, which, though previously at a four-decade high, has displayed signs of easing. Futures markets indicate a likely pause in the Fed’s rate-hiking campaign, with a shift towards cuts in the coming year. While pricing initially pointed to a reduction in March, the probability for the first expected cut has now shifted to May.
As the Fed approaches its final policy meeting of the year, investors are eager for insights into how officials perceive the economy. Policymakers aim for a soft landing characterized by modest growth, sustainable wage increases, and a return of inflation to the Fed’s 2% target. The state of consumers remains crucial, as they hold the key to the U.S. economy. Despite a 0.1% decline in retail sales in October, the numbers, unadjusted for inflation, suggest that consumers have kept pace with higher prices.
However, concerns loom over the end of Covid-era stimulus payments and the ongoing pressure from higher interest rates potentially impacting consumer spending. Household wealth contracted by about $1.3 trillion in Q3, primarily due to stock market declines, while household debt rose by 2.5%. The Fed remains vigilant about wage data, as rising prices could translate into increased wages, potentially triggering an inflationary spiral that proves challenging to control.
For the full original article on CNBC, please click here: https://www.cnbc.com/2023/12/08/jobs-report-november-2023-us-payrolls-rose-199000-in-november-unemployment-rate-falls-to-3point7percent.html
